Court rules against Exxon in pipeline case

Gas producers concerned about limited access

Posted: Sunday, July 29, 2007

By ALAN ZIBELThe Associated Press

WASHINGTON - A federal appeals court on Friday rejected an effort by Exxon Mobil Corp. to overturn rules governing access to a potential multibillion-dollar pipeline that would transport natural gas from Alaska to the Lower 48 states.

The U.S. Court of Appeals for the District of Columbia Circuit upheld Federal Energy Regulatory Commission rules published in 2005 that were designed to give Alaskan energy suppliers the ability to deliver their fuel through pipelines they don't own.

Natural gas producers, including Anadarko Petroleum Corp., were concerned that access to the proposed 3,600-mile pipeline would be limited by the companies building it.

Alaska has struggled for decades to get a deal either with North Slope gas producers or independent pipeline companies to build a line that could possibly run from the North Slope through Canada and into the Midwest.

A proposed deal between former Alaska Gov. Frank Murkowski and North Slope producers BP PLC, Exxon Mobil and ConocoPhillips fell apart last year.

Exxon argued that government regulations would force the pipeline's sponsors to build a larger pipeline than necessary to carry natural gas that might never be found, according to the court decision. The company also argued that the large costs of paying to build the pipeline for companies that hadn't committed to use it might make the project too risky to continue.

The court, however, ruled that FERC could not order the pipeline's builders to build more capacity than they want to add.

FERC in 2005 finished rules for the "open season" in which companies would bid for capacity on the pipeline.

Companies that own large amounts of the gas that will largely pay for the pipeline - will be able to pre-subscribe to pipeline capacity outside of an open season, under FERC rules. But other bidders must have an opportunity to negotiate the same terms.

Alaska Gov. Sarah Palin said this month that state is ready to receive applications to build a natural gas pipeline that officials believe will ultimately deliver trillions of cubic feet of reserves to market.

Representatives for Exxon and Anadarko did not immediately have any comment.